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http://www.economist.com/news/leaders/21572769-if-barack-obama-wants-cleaner-world-and-richer-america-he-should-allow-natural-gas

American energy and economics

Better out than in

If Barack Obama wants a cleaner world and a richer America, he should allow natural-gas exports

Mar 2nd 2013 |From the print edition: Leaders

[1] ON AMERICA’S Gulf coast, massive industrial facilities stand idle. Miles of twisting stainless-steel pipes and huge storage tanks gleam uselessly in the sun. They are a reminder of the hundreds of billions of dollars that America has invested in terminals for handling imports of liquefied natural gas (LNG). Thanks to the boom in domestic , those imports are no longer needed. America produces nearly as much gas as it consumes, and will shale gas soon produce far more.

[2] So the obvious thing to do with those idle terminals is to re-engineer them to handle exports. Instead of receiving shiploads of liquefied gas and re-gasifying it, they should be taking American gas, liquefying it and loading it onto tankers. Converting these plants will not be cheap—each one will cost at least $5 billion. But the potential rewards are much larger.

[3] In America gas sells for around $3.40 per million British thermal units (mBTU). In Europe it costs around $12. In gas-poor Asia, spot cargoes change hands for as much as $20 per mBTU. Since it costs roughly $5 per mBTU to liquefy the stuff, ship it and turn it back into gas, America could be making a fortune from gas exports. To the extent that such exports displaced dirty coal, they would also help curb global warming.

[4] Most of America’s two dozen LNG import terminals have applied for export licences. Yet only one, Sabine Pass in Louisiana, has actually started retooling its kit. Gas from there will start flowing onto global markets by the end of 2015. Why has every other terminal been so slow to seize this opportunity?

[5] Converting a plant is not easy: firms must build row upon row of expensive fridges, known as “liquefaction trains”, to get gas moving in the opposite direction. But the real hold-up is political. No LNG facility besides Sabine has yet received permission to export. American law requires the Department of Energy to determine whether gas exports are in the public interest, and President Barack Obama’s administration is in no hurry to make up its mind.

[6] The vocal lobby against gas exports unites environmentalists who object to fracking (the process by which gas is extracted from shale by blasting it with water) and many energy-hungry American corporations. They fret that allowing exports will raise gas prices for domestic consumers—like themselves, for instance.

Environmentalists and opportunists

[7] Both groups’ objections are unconvincing. Greens claim that fracking pollutes the air and groundwater, but the evidence suggests that any such pollution is limited. Energy-hungry firms, such as those that operate gas-fired power stations or smelt aluminium, fear that higher domestic gas prices would hobble the revival of American manufacturing. Firms that both guzzle energy and use gas as a feedstock, such as Dow Chemical, are especially worried. But Mr Obama should rebuff them, for two reasons.

[8] The first is moral. Gas-guzzling corporations want to prevent the owners of the gas from selling it to the highest bidder. That is like lobbying the government to force your neighbour to sell you his house at a discount, rather than sell it to somebody else. It is pure rent-seeking, and should be resisted.

[9] The second reason is economic. Gas prices in America are unsustainably low (see article), and will eventually rise a bit whether exports are allowed or not. However, they will remain much lower than elsewhere, because other countries have failed to frack as deftly as America. If Mr Obama prevents companies from exporting American gas, it will be left in the ground. The world will be a dirtier place, and America a poorer one.

Terms you should know

Shale gas; Shale gas is natural gas that is found trapped within shale formations.[1] Shale gas has become an increasingly important source of natural gas in the United States since the start of this century, and interest has spread to potential gas shales in the rest of the world. In 2000 shale gas provided only 1% of U.S. natural gas production; by 2010 it was over 20% and the U.S. government's Energy Information Administration predicts that by 2035, 46% of the United States' natural gas supply will come from shale gas.[2] Some analysts expect that shale gas will greatly expand worldwide energy supply.[3] China is estimated to have the world's largest shale gas reserves.[4] A study by the Baker Institute of Public Policy at Rice University concluded that increased shale gas production in the US and Canada could help prevent Russia and Persian Gulf countries from dictating higher prices for the gas they export to European countries.[5] The Obama administration believes that increased shale gas development will help reduce greenhouse gas emissions[6] (in 2012, The US carbon dioxide emissions dropped to a 20-year low[7]). Some studies have alleged that the extraction and use of shale gas may result in the release of more greenhouse gases than conventional natural gas.[8][9] Other recent studies point to high decline rates of some shale gas wells as an indication that shale gas production may ultimately be much lower than is currently projected.[10][11]

Discussion Questions

1.        Why is the production of shale gas around the world getting more important?

2.        Why have the America maintained low productions of shale gas recent years so far? Why is Mr. Obama’s idea different from other?

3.        Do you agree or disagree that “If Barack Obama wants a cleaner world and a richer America, he should allow natural-gas exports”? Why or why not?

4.        In terms of energy use around the world, Korea has not many natural resources. If you were in Energy Minister’s seat in Korea, what would you want to do and make a policy for our country?

5.        In cold winter or in hot summer, energy consumption is really going high. What is your secret energy saving plan?

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